Just last week, the UK welcomed another exciting young company into the billion-dollar club. Snyk develops tools that alert users and help fix security vulnerabilities in their open-source coding. Based in Hackney, the company has just raised a $150m funding round and reported a valuation of more than $1b (although it did not share the exact figure). The round was led by Stripes with participation from Amity, BoldStart, Coatue, Salesforce Ventures, and Trend Forward.
As the UK’s high-growth economy continues to mature, we’re seeing a greater number of companies reaching a billion dollar valuation – commonly referred to as ‘unicorn’ status. This rare breed of super-fast-growing, ambitious and young companies is changing the face of British business, and redefining what it means to be a successful startup.
Here at Beauhurst, we’ve now confirmed 22 UK companies that are valued at least $1b, including 17 active and private unicorns and five that have exited (either through an acquisition or IPO). In order to better understand this growing group of elite businesses, we produced an in depth report on the UK’s unicorns, the fundraisings and investors that have supported them, and the founders leading them forward.
This report was released back in September, just as CMR Surgical joined the exclusive club, and is one of our most popular publications to date. As such, we wanted to open up a discussion about our findings, so we teamed up with our friends at Smith & Williamson who helped facilitate the event.
On Thursday, 23rd January, we invited investors, entrepreneurs, and supporting organisations from across the UK’s high-growth space to join us at Smith & Williamson’s head office in Moorgate. Discussion centred on how we can better support more companies to reach a billion dollar valuation, and address the recurring question: ‘does the unicorn title really matter?’
PARVEEN DHANDA | Head of Programmes, TechNation
Parveen leads on TechNation’s prestigious accelerator programmes, including Future Fifty, Upscale, Cyber, Fintech and AI. Future Fifty is a late-stage growth programme that is specifically focused on developing digital businesses in the UK, offering services such as masterclass workshops and peer-to-peer networks. The programme is the best in the country at supporting unicorns, having accelerated 12 companies to a billion dollar valuation.
MARTIN FROST | Co-Founder, CMR Surgical
CMR Surgical provides robotic-assisted surgery procedures through its robotic system, Versius. CMR is a recent addition to the herd of UK unicorns, having secured a valuation of £929m at its seventh funding round in September 2019. Up until very recently, Martin was also CEO of the company, and is now a Non-Executive Director. His background is in innovation product design in Cambridge’s tech cluster.
VALENTINA KRISTENSEN | Director of Growth & Communications, OakNorth
Launched in September 2015, OakNorth Bank provides loans of £0.5 million to £50 million to fast-growth businesses, entrepreneurs and property developers. Today, OakNorth is one of the most active lenders in the UK, having lent over £3.3 billion. Valentina has been working directly with its co-founders since June 2015, helping to build the OakNorth brand and community.
TOM SHAVE | Partner, Smith & Williamson
From start-up to exit and beyond, Smith & Williamson has a unique ‘one-stop-shop’ of accountancy, tax and related services, which has been developed to meet the personal financial and business needs of founders, management teams and their investors. Tom specialises in advising corporate clients on a variety of business tax matters, with a particular focus on the financial services and technology sectors.
First, some key stats on the UK's unicorns
There are now 22 confirmed $1b companies in the UK. This includes 17 active and private unicorns, and five exited unicorns.
Download the full report to read our exclusive interviews with OakNorth Bank, Deliveroo and OVO Energy.
When did you first believe you could become a unicorn, and was it ever a formalised objective?
Kicking off the panel discussion, Martin reiterated that CMR Surgical is a mission-led company, “and if we were going to go anywhere near delivering the mission then getting to unicorn status was just an inevitable part of that journey”.
Similarly, OakNorth was set up because the company’s founders, Rishi and Joel, wanted to help SMEs have better access to finance. “We reached cash flow break even in 11 months, and this kind of milestone is more important to us as a company – the unicorn valuation is just a nice add-on to our other successes”.
Valentina also posited that when you consider the extent of the lending industry, which is estimated to be worth around £7 trillion globally, OakNorth’s $2.8b valuation is in fact fairly modest. “We choose patient capital investors, helping us scale as a private – and eventually as a public – company. But we’re all in it for the long term, so we’re not looking to exit any time soon.”
Having helped support hundreds of innovative digital companies through TechNation’s various accelerator programmes, Parveen reported that the unicorn term doesn’t really appear when founders relay their aspirations during the onboarding process. “Most of our attendees want to build strong, global and sustainable businesses, rather than chase a certain valuation.”
Does the term unicorn actually matter, and can it be a hindrance if companies are too focussed on valuations?
According to Parveen, the unicorn label does help with raising the profile of a company, especially if they’re looking to expand internationally, and it’s also helpful when it comes to hiring great talent. However, some founding teams may not like the term to be used in their companies because it distracts from their mission and goals. On a national level, the prevalence of the unicorn accolade is a great indication of the strength of the UK’s economy.
So there are ways in which ‘unicorn’ is a useful term, and it is one we should be talking about, but it certainly shouldn’t be the only thing we’re looking at when considering what constitutes a successful business.
In Martin’s experience, unicorn status has been very important for attracting investors, especially for companies that fall outside of the realms of fintech and AI (within which 10 out of 21 of the UK’s unicorns can be categorised). The CMR team initially found it very difficult to raise the capital to undertake the required research and development to fulfill their mission, and so they had to look outside of the UK. Now, 90% of CMR’s shareholders are based abroad. Young companies aren’t able to reach unicorn status if they don’t have significant financial support behind them, and so there needs to be interest and support from investors closer to home across a whole range of sectors, not just the buzzwords that we hear about on a daily basis.
As Tom noted, companies that reach unicorn status are highly ambitious and often don’t want to stop once they reach a billion or multi-billion dollar valuation – they’ll want to push on to exit. Exit events test a company’s valuation, and last year we saw a number of instances of valuations collapsing at an IPO event (including US firms WeWork, Peloton, Uber and Lyft). With this in mind, Tom emphasised that a large valuation certainly does help a company spur forward, and acts as a good representation of the economy. But a billion dollar valuation is ultimately just a stage in the journey of a super-fast-growing company.
Valentina noted the double-edged nature of unicorn status: whilst it does raise your profile, it also commands the attention of the media in a more critical manner. “Some of these companies are only a few years old and suddenly there’s a large expectation on them – the media backlash can be very strong.”
And whilst it can be a useful accolade on the recruitment side of things, it does mean that some talent might come to you for the wrong reason and be there for equity rather than the mission. “You should always focus on value delivering rather than the valuation”.
What do we need to do to make more unicorns – where are the opportunities?
There’s currently a lot of attention on B2C businesses, and you can see this by the flurry of media focus on Monzo and Revolut. Valentina thinks there needs to be more focus on B2B companies, and government attention on the visa process. At OakNorth, the team is growing by 15 people a week, which can cause problems with trying to arrange visas for talent from overseas. These difficulties can be particularly challenging for fast-growing businesses.
Parveen notes that she is now seeing more B2B companies apply to join the prestigious programmes at TechNation, so there’s definitely an opportunity to better support these types of companies.
In terms of sectors, there’s a challenge around gaining investment for IP heavy companies, especially those operating in the realms of artificial intelligence, because they often haven’t developed the product by the time they need to take on capital. It’s also incredibly difficult for these new emerging sectors like AI to work with corporates in the same way that other fast-growing businesses can, because it’s uncommon for corporates to have an AI strategy in place. Parveen also echoed Valentina’s concerns around the visa process, and says that TechNation will be working very closely with the government to pass on concerns.
Indeed, the UK government currently has very important decisions to make, because talent is one of the most important things to building a successful business. As Tom highlighted, we have to make sure that the country remains open to attracting people from across the world.
The environment that the government has cultivated so far is incredibly critical, with programmes like EIS and Entrepreneurs’ Relief really encouraging the high-growth economy. But these are areas that are currently at risk. This is concerning because these initiatives have the biggest impact on early stage businesses. As Tom puts it, “these incentives need to be in place, and further enhanced; if we want to encourage more unicorns then we need to support businesses from an earlier stage.”